Weekly Plurus Strategies Update on Infrastructure, the Budget Reconciliation, Reconciliation, and the Debt Limit

Although it’s recess, the Plurus team has remained hard at work taking advantage of the time to check in with senior Democratic staffers who are not away from the office on their summer vacations. Here is our latest report on the bipartisan infrastructure bill, the budget resolution, reconciliation, and the debt limit.

Infrastructure/Budget Resolution/Reconciliation

Long live recess. The House will be back in town next week. It is our understanding that votes will begin on Monday evening and Members may be on their way back to their districts as soon as Tuesday afternoon. The House hopes to vote Monday night on a rule to kick off debate on the budget resolution, voting rights legislation, and the bipartisan infrastructure bill. While the goal is to pass the first two measures this week, House Democratic leadership has reaffirmed that a final vote on the infrastructure package will not take place until after a vote on reconciliation. 

Moderate House Democrats upped the stakes this week for Speaker Pelosi as they went public with their threat to oppose the budget resolution unless there is first a vote on the bipartisan infrastructure package. Led by Rep. Josh Gottheimer (D-NJ), there are a total of nine moderate Democrats (also including Reps. Filemon Vela (D-TX), Henry Cuellar (D-TX), Vicente Gonzalez (D-TX), Ed Case (D-HI), Jared Golden (D-ME), Jim Costa (D-CA), Carolyn Bourdeaux (D-GA), and Kurt Schrader (D-OR)) who are continuing to push for an immediate, standalone vote on the infrastructure bill. These Members appear concerned that a Senate-passed reconciliation package that falls short on addressing progressive priorities might also sink the bipartisan infrastructure legislation. 

So far, House Speaker Nancy Pelosi (D-CA) has not signaled that she is open to negotiations with the moderates. The White House is publicly backing Speaker Pelosi’s strategy of moving the budget resolution and a waiting for reconciliation to advance infrastructure. This approach is likely aimed at appealing to progressives. OMB Director Shalanda Young and NEC Director Brian Deese are also reportedly working the phones to woo skeptical moderates, who appear divided on whether or not to support a vote on the rule before an actual vote on the budget resolution.

As of this moment, Speaker Pelosi has not blinked and many of the Democratic staffers we have consulted in the past 24 hours believe the tide is shifting in the Speaker’s favor. If necessary, it remains possible that Speaker Pelosi could offer moderates some “sweeteners” in the reconciliation package to help solidify their support for her preferred path forward. We joined a call yesterday with Rep. Peter DeFazio (D-OR), who has now come around to being one of the champions for the Speaker’s plan. Rep. DeFazio was of the view that outreach to moderates by the White House, Democratic leadership, and other influential Members has been effective in bringing the caucus together. 

As you may have seen, in a letter to the House Democratic caucus earlier this week, Rep. DeFazio made the argument that the Senate had control over the infrastructure package without much input from the House, making it all the more important that the House quickly move a budget resolution so that it can be influential in the reconciliation process. In particular, Rep. DeFazio indicated this is the best way to ensure House priorities are addressed, including getting earmarks back in the bill. He also said that reconciliation will be the best means to counter the shortcomings of the Senate infrastructure bill, including issues related to reducing carbon emissions, restoring transit funding, reconnecting neighborhoods, funding high-speed rail, and investments in wastewater infrastructure. This strengthens the assumptions we have heard from Democratic staffers that the House will take up the reconciliation package first and send it to the Senate.

Speaking of reconciliation, it is our impression from conversations this week that things are moving quickly. While the Senate budget resolution gives committees until September 15 to respond to reconciliation instructions, some committees are operating on overdrive. For example, one House committee told staffers to cancel their vacations and work through last weekend in order to provide text to legislative counsel by this past Monday. This particular committee’s goal was to have conversations with leadership this week, begin sharing language with stakeholders the week of August 23, and to be ready for a markup in September before Labor Day. In our view, this timeline is pretty ambitious. We are hearing the House Natural Resources Committee is eyeing a September 2 markup and the House Transportation and Infrastructure Committee has set their markup for September 12.

In the Senate, Majority Leader Chuck Schumer (D-NY) has asked committee chairs to have weekly meetings with members to talk about their reconciliation priorities so there are no surprises. It is unclear if these meetings are simply to “check a box” or if there is interest in substantive input. Although we have been told that each chair is holding these meetings differently and they are occurring on different days of the week, we are picking up reports that the group setting has made it difficult for Members to share freely.  

As bill writing takes place, lingering questions about reconciliation pay-fors remain. The main takeaway from the Finance Committee Member meeting has been that the messaging around reconciliation will be focused on “tax fairness rather than revenue raising.” At this point, Democratic staffers tell us they don’t know how many Members will end up fighting the $3.5 trillion topline for reconciliation. The conventional wisdom is that the $3.5 trillion number may hold and the debate may be more about what makes up that number. More specifically, we spoke with one Democratic Senate chief of staff recently who also said something along these lines and that Sen. Kyrsten Sinema (D-AZ) may end up going for $3.499 trillion.

As we reported last week, Senate Democrats want the bill to be entirely offset, but left themselves some wiggle room, as the budget resolution allows the reconciliation package to add $1.7 trillion to the deficit. We continue to hear that Democrats will be looking primarily at tax reform to raise revenue, although they are also likely to leverage healthcare savings and dynamic scoring. Some of the least controversial proposals, at least among Democrats, might include restoring the top individual tax rate to pre-Tax Cuts and Jobs Act (TCJA) levels and making modest increases to the corporate tax rate and the capital gains rate. Democrats also support further measures to bolster Internal Revenue Service (IRS) enforcement, although it is unlikely all of these pay-fors combined will get Democrats all the way to $3.5 trillion.

Unfortunately, we do not see infrastructure and reconciliation getting done much before the fall, even though Congress is simultaneously pushing right up against the September 30 deadline for FY22 appropriations. As one Senate legislative director pointed out, due to the Jewish holidays, there are only eight Tuesdays, Wednesdays, and Thursdays between now and the end of the year when Congress will be in session, which could make it tough to get things done.

Voting Rights

As noted above, the House will vote on voting rights legislation next week. On Tuesday, Rep. Terri Sewell (D-AL) introduced a revised version of the John Lewis Voting Rights Advancement Act. The bill would restore key provisions of the 1965 Voting Rights Act to protect against discrimination that were gutted by the 2013 Supreme Court decision in Shelby County v. Holder and in the 2021 case of Brnovich v. Democratic National Committee (DNC). Speaker Pelosi has expressed confidence the House will pass the bill on Tuesday. 

Leader Schumer has also committed to holding a Senate vote on a voting rights bill in September. However, unless there is a dramatic shift in dynamics in the upper chamber, it remains unlikely there will be 60 votes in the Senate to pass a voting rights bill.

Debt Limit

There is still no final resolution on the debt limit, which is set to expire this fall. Republicans have said they will refuse to vote to raise or suspend the debt limit, and Democrats have countered that they will not be including the debt limit in their reconciliation package and instead seem to be angling to suspend the debt limit on a continuing resolution (CR), which will require 60 votes for cloture. Should Democrats’ strategy backfire the U.S. risks defaulting on its loans and a downgrading of its credit rating, which also happened during the last debt ceiling crisis in 2011. 

Should Republicans hold firm against being helpful on the debt limit, there are still a few different paths Democrats might consider. While Sens. Joe Manchin (D-WV) and Sinema have so far been reluctant to shift their positions against changing the filibuster, it is possible they could be persuaded by the threats of default and the resulting economic fallout. Democrats could also trigger a second vote-a-rama by amending the budget resolution that was sent to the House last week. The White House might also attempt to change the debt limit by executive action relying on the 14th Amendment. 

For now, the economic future of the country is uncertain as 46 Republican Senators have signed onto a letter pledging to not vote for an increase in the debt limit. However, in another scenario, these Senators could hold their pledge by voting for cloture and then voting against final passage of a CR containing the debt limit hike, as the Senate could pass the bill with 51 votes after cloture.